The Defense Department on Thursday became the largest shareholder in MP Materials, which owns the only rare earth mine in the U.S., amid a surge in demand for rare earths mined in the U.S. as China has curbed its rare earth exports amid a trade war with the U.S.

Rare-earth firm MP Materials (MP) stock is skyrocketing after the company announced a deal for the US Department of Defense to buy $400 million of company shares. The Pentagon will be the company's largest shareholder as part of the US government's efforts to reduce China's rare earth metal dominance.

James Litinsky, MP Materials chairman and CEO, joins CNBC's 'Squawk on the Street' to discuss the company's deal with the Defense Department, in which the Pentagon will become the largest shareholder in the rare earth miner.

MP Materials launched a $500M public offering of common stock, and expects to grant a 30-day underwriters option to purchase up to an additional 15% of shares to be sold in the offering.

Pentagon investment in MP Materials is making headlines after the U.S. Defense Department announced a $400 million stake in the rare earth mining company. With this deal, the Pentagon becomes MP Materials' largest shareholder—fueling a major push to reduce America’s reliance on China for rare earths.